What's the Difference Between an Estate Tax and an Inheritance Tax?

An estate tax and an inheritance tax both arise when someone passes away and leaves assets to others, but they're levied differently and on different parties. An estate tax is paid by the estate itself before the assets are distributed to beneficiaries, and the federal estate tax only applies to estates worth more than $13.61 million in 2024. An inheritance tax is paid by the person who receives the assets, not the estate, and is only imposed by a handful of states. The federal government does not have an inheritance tax, so in most cases if you inherit money or property, you won't owe tax on it at the time you receive it. However, if the assets you inherit generate income after you receive them — such as dividends from inherited stocks or rent from an inherited property — that income is taxable to you going forward.